Fibonacci Ratios With Pattern Recognition

by Larry Pesavento, Steven Shaviro (Editor)

Quoted from Robert Miner's Dynamic Trading Analysis Report, Pesavento has been trading for 30 years. Today, he is primarily a day trader. His new book is well focused and organized. The bulk of the book describes a limited number of high probability patterns which coincide with clusters of Fib price projections that provide the short-term trader with high probability and low capital exposure trade set-ups. These trade set-ups are equally valuable for intermediate term traders as well. The short-term set-ups can also be used to enter for an intermediate term position. Quote from 1997 Supertrader's Almanac, Larry Pesavento presents a very persuasive argument that such patterns not only exist, but that the patterns can be profitably employed when they exhibit both the correct form and the form is in the correct proportions.

Genres: Science

184 pages, Paperback

First published July 1, 1997

Reviews

[Micah Rasmussen · Rating 5 out of 5]

Read this even if you don't trade in the stock market. The beginning is pretty interesting in the way that it teaches some basics on the history of math, geometry, and the stock market. The following pages took me a little bit to decipher as I wasn't sure where the author was going. However, once I got into the momentum of the book I was completely indulged in it. I feel that the most important part of this book comes from the ending, however. It has some hidden meanings in the appendix's that are great life lessons in general. Loved the book.

[Matheus Sevaroli · Rating 3 out of 5]

These highlights reflect the passages that stood out to me personally, capturing moments that resonated, challenged, or intrigued me:

"There are four things that will determine the consistency and duration of the waves:

The height from which the rock was dropped
The weight of the rock
The depth of the water

Market react to thrust in much the same way. Typically, a new announcement or scheduled economic report will cause this thrust in the speculative markets.

The Opening Price Principle is this:

The opening price will be at or near the high or low of that day 85-90 percent of time, showing you the key trend. If prices below opening, only go short, if prices are above, only go long.

Some practical tips on cycles:

The first principle is that of high translation. This means that bearish and bullish cycles have distinct characteristics.

- Bullish Cycle - High Translation to Right, cycle crest far to the right or late in the cycle: bullish markets spend more time going up.
- Bearish Cycle - High Translation to Left, cycle crest far to the left or early in the cycle: bearish markets spend more time going down.

The second principle is that of nominality. Cycles usually repeat in equal increments. For instance, if there is a 9 period cycle, it will usually repeat for at least 2 cycles = 18 periods.

The study of cycles can be improved by using the principles of rational proportion."

[Nancy · Rating 1 out of 5]

This book serves its purpose to give me an overview of some basic trading patterns, whose names pepper stocktwits. There is not much jargon or math, but enough examples at day-trading intervals so that basic human pattern recognition is enough to achieve understanding. This book is not very convincing, so I remain skeptical if these patterns are useful at all for risk analysis as the author claims. Especially given the HFT markets today, I doubt there being any advantage left to using these patterns. There is a possibility that the patterns still capture an edge at different time ticks, either much shorter or much larger intervals, so I would not be dismissive here. The author does show self awareness and humility, given the best line from the book, IMO:

"I neglected to realize that I confused success with a bull market and I was unprepared when the bear market finally came."

[Tim Duggan · Rating 3 out of 5]

Lot on harmonic patterns. Easy to get caught up in these but they are just something to be aware of, not the core of a strategy.